Are you ready for a digital tax system?

On 14 December 2015, HMRC published their roadmap document ‘Making Tax Digital’ (MTD), setting out their plan for the further digitisation of the tax system over the life of this Parliament.

In a way, it is a fantastic document. Setting out a long term strategy with a string of milestones and a plan to move from start to finish, the document presents the type of real world commercialism so often lacking in the public sector.

However, once you are pass the Windows 10 meets London Tube Map aesthetics, you get to the underlying message. By the second half of 2018 almost all businesses, self-employed persons and property landlords will be obliged to file quarterly updates with HMRC using commercially available bookkeeping software, which plugs into HMRC’s interface.

The publication has caused quite a stir and, as well as the backlash from firms of accountants and small businesses, a string of professional and trade bodies have slammed the proposals. HMRC were clearly feeling the pressure when they published their follow-up ‘Myth-Buster’ document, adamant that the policy represented an administrative simplification and cost saving for small businesses. A survey carried out by the Institute of Chartered Accountants in England and Wales (ICAEW) suggested otherwise, finding that only a quarter of businesses and 18% of sole traders currently maintain records in the kind of proprietary software which MTD will require.

MP Andrew Tyrie wrote a letter to the Financial Secretary to the Treasury mirroring the concerns voiced by businesses and the accountancy profession alike. Despite his concern, Andrew Tyrie acknowledges that “no doubt making tax digital is the future. But businesses and their customers should not be expected to foot the bill for the transition”. Similarly, the ICAEW and Chartered Institute of Tax are supportive of a move towards a digital tax system, but both urge a voluntary transition in place of a mandatory one.

Confirmation was received from HMRC in mid-May that publication of the eagerly anticipated consultation on MTD has been postponed until after the EU referendum. For the digitally averse, it is probably best to watch this space for the next few months in the hope and expectation that any mandatory element to the scheme will be deferred, softened or even scrapped.

For the IT generation, however, there are all sorts of advantages to voluntarily adopting cloud bookkeeping, automation, mobile application and real-time information solutions to your business record keeping needs. Whether it is bank information feeds auto-populating your records or dashboard style real-time financial information on whatever device you have to hand, embracing this 21st century technology can revolutionise how you manage your business finances. We can guide you through the process of choosing and installing the best online software for your business to ensure you reap the greatest benefits from it.

If you would like to discuss any of the above in detail, please contact David Hailey or your local UHY adviser.